Brexit panic: Germany urged to take URGENT ACTION as economy slows due to UK's EU exit

German exporters are struggling with weaker demand from abroad, trade tensions triggered by US President Donald Trump's "America First" policies and business uncertainty caused by , with one downbeat assessment suggesting “the best times are over”. The difficult trade environment means that Germany's vibrant domestic demand, helped by record-high employment, inflation-busting pay increases and low borrowing costs, is expected to be the sole driver of growth this year and next. To counter the slowdown, Finance Minister Olaf Scholz plans to support corporate research and development with incentives worth 1.27billion euros ($1.43billion) annually from 2020, a draft law seen by Reuters showed on Wednesday.

Companies doing basic research or industrial development can apply for a bonus of up to 500,000 euros per year, with the incentives not limited to small- and medium-sized firms as originally planned, according to the draft law.

Cabinet is expected to pass the measures in mid-May.

Germany's BDI industry association urged the government to offer more incentives for climate-friendly corporate investment and to slash taxes for companies.

BDI Managing Director said: “The best times for the economy are over. The Government must not lose any more time."

Presenting the government's Spring forecast, said on Wednesday that Berlin now expects gross domestic product to grow 0.5 percent this year after an expansion of 1.4 percent in 2018.

The government had already cut its 2019 forecast in January to 1.0 percent growth from 1.8 percent previously.

For 2020, the government sees a consumption-driven rebound with economic growth of 1.5 percent.

Mr Altmaier said Brexit uncertainty, along with the slowing world economy and various trade disputes were weighing on the German economy. 

Domestic factors include the introduction of new car-emission regulations and unusually low Rhine water levels, which have led to supply and production bottlenecks.

Import growth is expected to surpass export growth in both 2019 and 2020, which is likely to reduce the large trade surplus further.

A statement issued by the country’s Economy Ministry said: "The current account surplus will continue to shrink continuously and will go down to 6.4 percent (of GDP) in 2020.”

Government measures such as higher child benefits and increased pensions for mothers will give the economy an additional boost this year, said.

He called on Finance Minister Olaf Scholz and his centre-left Social Democrats, the junior partners in Chancellor 's coalition, to support tax cuts for companies and agree on refraining from any measures that could burden the private sector.

While rejecting calls for consumption-oriented fiscal stimulus, Mr Altmaier said Berlin should now focus on supporting companies by cutting red tape and lowering corporate levies.

Mr Scholz told the world's financial elite gathering in Washington last week that Berlin is already spending its record budget surplus on investment in infrastructure and support for families with low or medium incomes.

A Finance Ministry spokeswoman said that Mr Scholz saw no need for a broader overhaul of the corporate tax system.

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